RMB not undervalued

"While undervaluation of the renminbi was a major factor causing the large imbalances in the past, our assessment now is that the substantial real effective appreciation over the past year has brought the exchange rate to a level that is no longer undervalued," Lipton said after meeting with high-ranking Chinese officials.

This signaled a change of tone in the IMF's judgment on this issue after maintaining for a long time that renminbi was "moderately undervalued". Many experts believed that the value of renminbi has reached equilibrium.

The value of renminbi has been a source of tension between China and some trading partners, as they accuse China of keeping it artificially low to gain an unfair competitive advantage, which Beijing refuted.

Lipton stressed that it is a judgment "about this moment" and may change in the future.

"However, the still-too-strong external position highlights the need for other policy reforms--which are indeed part of the authorities' agenda--to reduce excess savings and achieve sustained external balance," Lipton said at a Tuesday press conference.

"We believe that China should aim to achieve an effectively floating exchange rate within 2-3 years," he added.

China has adopted a steady pace in raising the yuan's daily trading limit against the US dollar, from 0.3 percent in 1994 to 0.5 percent in 2007 and 1 percent in 2012 to the latest 2 percent, in an effort to enhance the floating flexibility of the renminbi exchange rate.

RMB's SDR inclusion

Lipton said Chinese authorities have stated publicly their interest in including the yuan in the IMF's Special Drawing Rights (SDR) basket, a move that has been highly anticipated.

"We welcome and share this objective and will work closely with the Chinese authorities in this regard," he said.

The IMF has launched its five-year review of the SDR basket, an international reserve asset that currently includes the US dollar, Japanese yen, British pound and the euro. Whether to add the yuan to the basket is a major issue for this year's assessment.

The review process will take a majority of this year, and "we are looking at the progress that's been made in internationalization of renminbi and we are following very closely the steps that the People's Bank of China (PBOC) is making and plans to make in order to promote the free use of renminbi internationally," he told Xinhua.

"We hope that when we have done all that analysis and when the PBOC has undertaken these reforms, we will get to a proper conclusion," Lipton added.

Renminbi has overtaken the Canadian and Australian dollars since November 2014 to enter the top five world payment currencies, trailing only the Japanese yen, British pound, euro and US dollar, according to the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

"As the Managing Director of the IMF has said, renminbi inclusion is not a matter of 'if' but 'when'," Lipton stressed.